Commonwealth Bank fined $36,000 after pleading guilty to failing to pay long-service entitlements to staff

Australia’s richest company has been fined $36,000 after pleading guilty to failing to pay long service entitlements to staff.

The Commonwealth Bank is one of the country’s largest private employers and produced a profit of $9.5 billion last year.

But on Monday she faced the humbling experience of appearing in the Melbourne Magistrates Court alongside shoplifters and drunk drivers after a successful case brought by the Victorian government’s pay inspector.

The pleas for leniency were in many ways similar: contrition, contrition, and no advance.

Magistrate says there was ‘no adequate excuse’

A state government agency that tracks wage theft, the Victoria Pay Inspectorate, alleged in 2022 that BankWest and CommSec broke the law by failing to pay more than $69,000 in long-service leave entitlements to 23 former employees.

In Monday’s court session, which was reduced to 17.

For individuals, the amount ranged from $500 to more than $10,000. Most were over $1,000.

Before Magistrate Kathryn Fawcett, the bank’s lawyers pleaded guilty to the criminal charges.

The bank has spent more than $1 million to fix the problem and has agreed to pay $12,000 in legal costs to the payroll agency.

“Unintentional or system failures should not occur [given as] a response to the inability to pay employee entitlements,” Magistrate Fawcett said in sentencing.

The judge said no conviction would be recorded because Commonwealth Bank has no previous convictions for breaching Victoria’s long service laws.

It imposed fines of $18,000 on the two entities, which was well below the $1.2 million imposed on Woolworths for similar offenses affecting a much larger group of employees.

The magistrate said the bank’s early guilty plea avoided what would have been a larger “total fine of $40,000” for each entity.

The investigation reveals that hundreds of employees are underpaid

During the investigation it was found that Commonwealth Bank companies underpaid 529 current and former employees $1.673 million in long service leave entitlements.

But it is only an offense under the law if they are an ex-employee, when someone is not paid their entitlement when employment ends.

In a statement, a CBA spokesman said the bank “has cooperated with [Wage Inspectorate Victoria’s] investigation”.

“These issues should never have happened, and we again apologize to our people who were affected by these past mistakes,” he said.

“We have remedied approximately $60,000 in underpayments, plus interest, for the 17 former employees who are the subject of the proceeding.

“We have invested significant resources in improving our systems and processes to address the risk of underpayment of employee entitlements.”

The underpayments to people who were still employed by the Commonwealth Bank had to be rectified but do not count as breaches under the act.

The law in question is section 9(2) of the Victoria Long Service Leave Act 2018 and the maximum penalty for any offense is 60 penalty units ($10,904) for each day that the offense continues.

The agency has been successful in similar cases involving long service leave rights against Woolworths, Coles and Optus.

That might not sound like a lot of money, or a lot of staff, compared to the almost 50,000 the bank employs. But in most cases brought this way – and in this particular one – the companies involved have subsequently audited all staff potentially affected by the breach of the law and compensated those whose wages were stolen.

Complex problem

Stephen Clibborn of the University of Sydney Business School has been investigating the area of ​​wage theft for the past decade.

“My research with organizations like this and others shows that many of them have not put enough effort or allocated enough resources to ensure they are compliant,” Dr Clibborn said.

Beyond the fact that compliance with the law is a basic level requirement, the argument about complexity misses what Dr Clibborn says is a key point: companies do extremely complex things all the time.

Qantas maintains a global airline fleet while Woolworths and Coles manage thousands of perishable product lines across a continent.

He gives another example: “It is recognized by many organizations that the tax laws are complex, but they make efforts to ensure they are compliant, they pay for the advice they need and have the systems in place,” he said.

“This does not appear to have been the case with employment laws.”

What will these fines mean for the bank?

Fines would hardly act as a deterrent to businesses where profits can reach billions of dollars a year.

Coles was fined $50,000 in 2021 for what Magistrate Justin Foster described as a “systemic failure” to ensure employees took their full long service leave entitlements.

In May, utility company Spotless was fined $12,000 and last month Optus was fined $13,000 and ordered to pay $15,000 in costs.

But an April ruling by Magistrate Nahrain Warda caught the attention of corporate Australia, after supermarket giant Woolworths was fined $1.3 million for underpaying more than $1 million in long service leave for more than 1,000 employees.

Magistrate Warda called the situation a “systematic and widespread failure” by one of the country’s largest employers.

“It is to be expected that such a large corporation, extending throughout Australia, will consequently have complete payroll systems.”